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Does Industry-Specific Expertise Improve Board Functioning? Evidence From Forced Bank Ceo Turnovers, Zhongdong Chen
Does Industry-Specific Expertise Improve Board Functioning? Evidence From Forced Bank Ceo Turnovers, Zhongdong Chen
Doctoral Dissertations
This study investigates whether independent directors’ expertise in the industry in which the firm operates improves board functioning. To assess the quality of board functioning, I examine firm performance following a CEO turnover. Using a sample of 173 bank CEO turnovers from 1995 to 2010, I find that the market responds more favorably to forced CEO turnover decisions when they are made by a board with more independent financial industry experts. I document that following a forced bank CEO turnover, improvements in bank performance are positively related to independent financial industry expertise on the board, while bank-risk taking is negatively …